By: Christopher Lewis
The oil markets around the world have been stuck in a bullish pattern, but limited in how much they really are moving. It has been a strange feel to the markets, as there is demand from emerging markets, but very little form industrialized nations. At the same time, the Middle East continues to push out headlines that have people worried – most notably from Iran. The Iranian insistence on fighting the will of the rest of the world always seems to suggest that hostilities are a real possibility, but the reality is that it more than likely won’t happen. Because of this – the oil markets are a bit on the “funky” side lately, just hovering above the $105 level in the Light Sweet Crude as an example.
The USD/CAD pair of course will move in tandem over the long term with the oil markets, and the malaise at higher levels certainly has had an effect on this market. The USD/CAD pair has been very congested, but we are finally starting to see some sort of order to the madness, and as such see the market for what it is – a short-term one.
200 day EMA, Parity, and Ranges
The pair is without a doubt range bound at this point. On the high end, you have the parity level as the market simply cannot close above it. In fact, I have resistance all the way up to the 1.01 handle, and the fact that the 200 EMA is sitting just above it makes this pair struggle to rise overall, and I think that in the short-term it will always struggle at that point. The selling of this market at the parity level is one of the more reliable trades at the moment, and this is what I am doing myself.
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However, I don’t advocate longer-term positions at the moment, as there are simply far too many factors at one time in this market, much of which are of the political nature – the hardest to quantify. With that being said, I am fading rallies as we approach parity.